Buying a home with friends

The average age a first time buyer now buys their own home is 38 years old, older still in London at 43 years old. With steep house prices and a shortage of mortgages many potential first time buyers are giving up on their dream of owning a home and renting instead.

This doesn’t necessarily have to be the case though, an increasing number of single first time buyers are getting onto the property ladder by buying with friends. Joint ownership has always been common among those in relationships but in recent times buying with a friend has become increasingly popular.

It can be a great way of raising the finance needed for a deposit but there are also many potential pitfalls and although buying your first home is an exciting time it is worth considering a few worst case scenarios before making that leap with friends:

• What if you fall out/argue? What would happen if someone wanted to move out?

• What would happen if one of the housemates got into a serious relationship? Would their partner be able to stay over/potentially move in?

• What would happen if a housemate lost their job and couldn’t keep up repayments? If you buy a house together you are all responsible for ensuring the mortgage repayments are met. The lender chases repayments by property not by individual housemate.

• Who will pay for what in the house? Will all bills be split evenly or will different housemates be responsible for different utilities?

The next step, as with any joint mortgage, is to all discuss your financial affairs with each other and be honest! It is worth all housemates checking their credit file on Experian or Equifax (these offer a 30 day free trial so remember to cancel after viewing your file) to check that they don’t have any debts/unpaid bills/unusual activity against their name. If they do it may affect your application and result in your joint application being refused by the lender.  

Before committing to a house purchase it is worth trying renting as housemates for six months or so, this allows you to see if you are compatible as housemates and gives you an opportunity to see how you all manage rental/bill payments. If one person struggles to meet payments or has to be chased repeatedly each month it may be worth reconsidering buying a house with them.

Once you have considered all of the risks and decided that you will be great housemates it is time to see a solicitor to draw up agreements/contracts between you, search for your dream home and then look for the best deal on a mortgage. Moneysupermarket and Moneysavingexpert have some great comparison deals to search through.